Deck 15: Real Property: Sales and Mortgages

Question 1

The remedy of specific performance is available only if monetary damages would be inadequate.Consequently, while that remedy is frequently available to purchasers, it is never available to vendors, who are contractually entitled to payments of money.

Answer 1

False

Question 2

A piece of land called Blackacre is subject to a mortgage in favour of Hal.The mortgage was created to secure a debt of $100 000 that Myriam owed to Hal.Myriam defaulted on the repayment of that debt.Blackacre is worth $250 000.Hal has announced that he intends to use the remedy of foreclosure.Because Myriam's default was negligent, a court would probably allow him to do so even if Myriam asked for an order for judicial sale instead.

Answer 2

False

Question 3

Robert borrowed money from Yanami.As security for that loan, he gave a mortgage over his house.The parties' agreement does not contain a prepayment privilege.Consequently, if Robert repays the loan more quickly than agreed, Yanami may be entitled to a bonus.

Answer 3

True

Question 4

Hiram owns a piece of land that he wants to sell to Regina.She wants to buy it for the purpose of building a shopping mall.It is not yet clear, however, whether the municipal government will give planning approval for the proposed mall.Hiram and Regina consequently will probably immediately create a contract that is subject to a condition subsequent.

Question 5

A mortgage exists between Jonah and Marina with respect to a piece of property called Blackacre.The mortgage agreement contains a prepayment privilege.In normal circumstances, Jonah would want the inclusion of that clause if he is the mortgagor, but not if he is the mortgagee.

Question 6

A piece of land called Blackacre was subject to a mortgage in favour of Alona.After the mortgage went into default, she asked the court for the remedy of foreclosure.She was granted an order nisi.Blackacre therefore now belongs to her and cannot be taken away.

Question 7

A piece of land called Blackacre is subject to a mortgage in favour of Maia.The mortgage is in default.It may be possible for Maia to enforce her security by selling Blackacre without complying with the procedures for a judicial sale.

Question 8

A mortgage under a registry system involves an immediate conveyance of title, but a mortgage under a land titles system does not.

Question 9

Nuala recently acquired an interest in a piece of land called Blackacre.A chain of title

A)is relevant only if she also wants to buy another piece of land that is located next to Blackacre.
B)is relevant only if she is a mortgagee and there is at least one other mortgagee.
C)is one of the three principles that form the notion of indefeasibility.
D)was probably used by a surveyor to accurately measure the boundaries of Blackacre.
E)need not be proved if Blackacre is located west of Manitoba.

Question 10

The priority of mortgages is always determined by the order of registration rather than by the order of creation.

Question 11

A piece of land called Blackacre is subject to a mortgage in favour of Henri.The mortgage was used to secure a debt that Sophie owed to him.Sophie defaulted upon payment of that debt.Henri can extinguish her equity of redemption by exercising his right to take possession of Blackacre.

Question 12

Kate believed that she owned a piece of land called Blackacre.She purportedly sold it to Ben.The land titles office issued a new certificate of title that named Ben as the exclusive owner of Blackacre.In fact, however, Kate was not really entitled to sell Blackacre.Although none of the parties realized it at the time of the sale to Ben, Blackacre actually belonged to Sam, and not to Kate.The official at the land titles office carelessly failed to realize that fact when the new certificate of title was issued.Which of the following statements is TRUE?

A)Sam is still the owner of Blackacre because the mirror principle states that the certificate of title must reflect the actual facts.
B)Sam is still the owner of Blackacre because the curtain principle required Ben to "lift the curtain" and determine the true owner of Blackacre before entering into the sale.
C)Sam is entitled to compensation from the assurance fund.
D)Ben is entitled to compensation from the assurance fund.
E)Ben is the owner of Blackacre because Sam could have avoided any difficulties by tracing a good chain of title.

Question 13

Alexis borrowed $500 000 from Chong.As security for the repayment of the loan, she gave a mortgage over her property.The property is registered under a land titles system.Alexis has now repaid the loan and otherwise satisfied the terms of the mortgage.Nevertheless, she may not be entitled to a re-conveyance of title.

Question 14

Horatio owns a piece of land called Blackacre.He contractually agreed to sell it to Bharati for $200 000.Although the sale was not scheduled to close for four weeks, Horatio required Bharati to pay $10 000 immediately.Shortly before the sale was scheduled to close, Horatio told Bharati that he had changed his mind and that he was not willing to complete the sale.If he refuses to refund her $10 000, she would be entitled to use a vendor's lien.

Question 15

Ava is a scoundrel.She owned a piece of land called Blackacre, which is located in a registry system jurisdiction.On Monday, she sold it to Marlon.Two days later, on Wednesday, she sold it again to Frank.She had no right to do so.Which of the following statements is TRUE?

A)Blackacre is now owned by whoever's name appears on the most recent certificate of title.
B)Ava is entitled to compensation from the assurance fund.
C)Marlon can become the owner of Blackacre even if he registers his interest without notice of Frank's interest.
D)Because Ava already sold Blackacre to Marlon, Frank cannot acquire the fee simple as a result of registration.
E)The doctrine of indefeasibility will protect Marlon.

Question 16

Kiri bought a piece of land from Saul.Before doing so, she followed her lawyer's advice and traced a chain of title back 10 years.Which of the following statements is most likely to be TRUE?

A)The land is located somewhere in western Canada.
B)The land is held under a land titles system.
C)In the circumstances, there was no need for Kiri to have purchased title insurance.
D)The land is located in a deeds registration jurisdiction.
E)The land is subject to a life estate.

Question 17

As a matter of risk management, commercial lenders (such as banks) are normally willing to accept a mortgage for 100 percent of a property's current market value.That practice is based on the effects of inflation and on the fact that property values always increase no matter what happens in the economy.

Question 18

Jacinta owns a piece of land called Blackacre.She created a mortgage over Blackacre in favour of Simon.She then created a second mortgage in favour of Paolo.Simon has foreclosed on the property.As a result, he was able to extinguish Jacinta's title because she did not repay her loan to him.However, Simon's foreclosure cannot extinguish Paolo's second mortgage interest in Blackacre because Paolo did not receive any benefit from Simon.

Question 19

Which of the following statements is TRUE?

A)A registry system is sometimes called a Torrens system.
B)Every province in Canada uses both a land titles system and a registry system.
C)The rules that govern a land titles system were developed by judges, rather than legislators.
D)The three principles of a land titles system are the mirror principle, the curtain principle, and the indefeasibility principle.
E)An unregistered short-term lease may be enforceable under either a registry system or a land titles system.

Question 20

The remedies for breach of a mortgage were developed over several centuries by both the courts of law and the courts of equity.Consequently, it has not been necessary to legislate in the area.

Question 21

Herschel borrowed $500 000 from Minah.As security for the repayment of that loan, a mortgage was created over a piece of land called Blackacre.Which of the following statements is TRUE?

A)Herschel is necessarily required to pay interest on the primary debt.
B)Herschel must have owned Blackacre at the outset.
C)If the mortgage created a charge on Blackacre, that piece of land must have been located in a land titles system.
D)Herschel must have borrowed the $500 000 from Minah for the purpose of buying Blackacre.
E)If Blackacre is located in a registry system, then the mortgage should be registered only if there is a possibility that it will not be repaid within three years.

Question 22

Hristo created a mortgage, in favour of Tippi, over a piece of land called Blackacre.Which of the following statements is TRUE?

A)If the mortgage created a charge, Blackacre must be located in a land titles system jurisdiction.
B)If Hristo is entitled to create a subsequent mortgage, Blackacre must be located in a land titles system jurisdiction.
C)If the mortgage is enforceable against a subsequent purchaser of Blackacre, Blackacre must be located in a registry system jurisdiction.
D)If the mortgage was indicated on a certificate of title, Blackacre must be located in a registry system jurisdiction.
E)Hristo must have purchased Blackacre from Tippi.

Question 23

Which of the following statements is TRUE?
A.The word "foreclosure" is derived from words that mean "end before payment" in Latin.
B.The word "nisi" is derived from the words that mean "unless" in Latin.
C.The word "mortgage" is derived from the words that mean "dead land" in Latin.
D.The phrase "Torrens system" is named after an Austrian who created the registry system.
E.The word "mortgagor" is derived from the words that mean "money lender" in Latin.

Question 24

Albert owns a piece of land called Blackacre.He has accepted Dawn's offer to buy it for $200 000.That agreement of purchase and sale is, however, conditional on Dawn's ability to sell Whiteacre, a property that she currently owns.Which of the following statements is most likely TRUE?

A)The parties' agreement is subject to a condition subsequent.
B)If Dawn changes her mind, she is fully entitled to avoid purchasing Blackacre simply by refusing to seek a purchaser for Whiteacre.
C)Albert can waive the condition and insist upon performance of the sale if Dawn is unable to find a purchaser for Whiteacre.
D)Although the contract is subject to a condition, Dawn must immediately make a good faith attempt to sell Whiteacre.
E)The existence of the condition means that the parties will not have a contract unless and until Dawn sells Whiteacre.

Question 25

Astrid borrowed $500 000 from Bartholomew.As security for the repayment of that loan, she created a mortgage over a piece of land called Blackacre.That mortgage was immediately registered.Which of the following statements is TRUE?

A)Until Astrid repays the loan, Bartholomew will hold an equity of redemption.
B)If Astrid defaults on the mortgage, and Bartholomew uses the remedy of judicial sale to sell Blackacre for $750 000, then he will be entitled to receive the amount of the mortgage debt, plus interest and costs, including the costs of sale.
C)Even if Astrid defaults on the mortgage, she can obtain a decree nisi from a court, which automatically gives her the right to pay at her convenience.
D)If Astrid sells Blackacre to her friend Elsa, Bartholomew will no longer be able to demand repayment of the loan from Astrid.
E)Even if Astrid defaults on the mortgage, Bartholomew cannot obtain a foreclosure unless he has first obtained an order for possession.

Question 26

Salome owned a piece of land called Blackacre.She committed the tort of nuisance against Prem by allowing noxious fumes to waft from Blackacre and onto his property.The court held her liable for $100 000 in compensatory damages.Recently, Salome sold Blackacre to Shandon for $250 000.Which of the following statements is most likely TRUE?

A)Shandon's purchase of Blackacre cannot possibly be valid unless Salome has paid $100 000 to Prem.
B)If Salome has not yet paid $100 000 to Prem, and if Prem filed a writ of execution with the sheriff's office before the date of the purported sale, then Shandon's purchase of Blackacre cannot possibly be valid.
C)Prem can use a vendor's lien to force the sale of Blackacre if he does not receive $100 000 from Salome within 24 months from the date of judgment in the nuisance action.
D)Prem can use a vendor's lien to force the sale of Blackacre if he does not receive $100 000 from Salome within 12 months from the date of judgment in the nuisance action.
E)Shandon did nothing wrong and Prem does not have a registered interest on title.Nevertheless, if Blackacre is located in a jurisdiction that recognizes writs of execution as interests in land, then Shandon may lose Blackacre if he refuses to pay $100 000 to Prem.

Question 27

Letitia contractually agreed to sell a piece of land called Blackacre to Rocco for $250 000.Closing was scheduled to occur on June 1.On May 15, however, Letitia told Rocco that she did not intend to transfer title to him.Which of the following statements is TRUE?

A)If Blackacre is really worth $300 000, and if Rocco has not paid any part of the purchase price, he will be entitled to damages of $50 000.
B)A court will not order specific performance if Blackacre is really worth $300 000.
C)As a matter of fairness, if Blackacre is really worth $300 000, a court will order specific performance only if Rocco agrees to increase the purchase price by $50 000.
D)Canadian courts no longer order specific performance of contracts for the sale of land.
E)If Rocco already paid the purchase price, and if Blackacre is really worth $300 000, Letitia will be required to pay a total of $50 000 in compensatory damages.

Question 28

Which of the following statements provides the best definition or description for "the curtain principle"?

A)A subsequent mortgagee will lose its security if a prior mortgagee forecloses.
B)The sale of a residential property usually includes anything attached to the house, such as curtain rods and dishwashers.
C)An interest in land may be obtained through adverse possession if the owner does not use a "window of opportunity" to enforce its rights.
D)A purchaser of land should conduct a title search to ensure that there are no hidden interests in the property.
E)There is no need to look behind a certificate of title in order to identify valid interests in land.

Question 29

Which of the following interests in land is most likely enforceable despite the lack of registration?
A.private easement
B.licence
C.public easement
D.long-term lease
E.chattel mortgage

Question 30

Randall initially owned a piece of land called Blackacre that was worth $400 000.He borrowed $200 000 from Keir and created a mortgage over Blackacre in favour of Keir.Randall then borrowed $100 000 from Ian and created a mortgage over Blackacre in favour of Ian.Randall has not repaid any part of either debt.Because of a recession, the value of Blackacre has dropped to $90 000.Which of the following statements is TRUE?

A)It is possible that Ian will be treated as the initial mortgagee, and that Keir will be treated as the subsequent mortgagee, if Ian registered before Keir in a land titles system.
B)Keir must be treated as the initial mortgagor regardless of whether he registered before or after Ian.
C)If Randall defaults on the mortgages and Blackacre is sold for $90 000, Keir will receive $60 000 and Ian will receive $30 000, because Randall owes Keir twice as much as Ian.
D)Ian still has some equity in his property so he should be able to find another mortgage lender to lend as a third mortgagee.
E)By granting two mortgages over the same property, Randall has committed mortgage fraud.

Question 31

Pavla is the victim of mortgage fraud in connection with a piece of land called Blackacre.Blackacre is located in a jurisdiction that uses a land titles system.Which of the following statements is TRUE?

A)Pavla cannot possibly lose title to Blackacre unless she carelessly allowed the fraud to occur.
B)Pavla is entitled to compensation from the assurance fund as soon as she proves that she is the victim of fraud.
C)Fraud is a general exception to the traditional doctrine of indefeasibility.
D)The courts usually respond to mortgage fraud by ordering the victim and the mortgagee to hold the affected property as joint tenants.
E)The concept of deferred indefeasibility delays the creation of an indefeasible title until an interest is registered by a person who did not deal with the rogue.

Question 32

Suneeta wants to buy a large commercial property called Blackacre from Horst.The property contains various types of buildings.It is currently used as a television studio.Suneeta wants to use it as an Internet telecommunications centre.Which of the following statements is true as a matter of risk management?

A)Suneeta should hire an appraiser to determine whether or not Blackacre is, from a technical perspective, suitable for her business purposes.
B)Suneeta should hire an inspector to ensure that the property and the buildings are safe, and she should hire a lawyer to make sure the land is zoned for her intended use.
C)Suneeta should hire an environmental auditor to ensure that the buildings are strong enough to withstand the worst weather conditions that might reasonably be expected to occur in the area.
D)Suneeta should hire a surveyor to search the marketplace and ensure that no other suitable property is available.
E)Suneeta should hire a real estate agent to ensure that the land supposedly included within Blackacre does not encroach upon a neighbouring property.

Question 33

In order to purchase an interest in piece of land called Blackacre, Rhiannon borrowed $100 000 from Nick.As security for the repayment of that loan, she entered into a mortgage over a piece of property.Which of the following statements is TRUE?

A)It is possible that Rhiannon gave a mortgage over a diamond ring that she owned.
B)The transaction must have occurred in a registry system.
C)Rhiannon must have purchased Blackacre from Nick.
D)Rhiannon must have purchased the fee simple in Blackacre.
E)Blackacre must be the property that is subject to the mortgage.

Question 34

Which of the following statements provides the best definition for "the insurance principle," as that phrase was used in the text?

A)Because of the difficulties associated with title searches in registry systems, it is often prudent for the parties to a sale of land to purchase insurance that will provide a source of compensation if the chain of title is not properly established.
B)The purchaser can sue the vendor for compensation if the vendor fails to provide clear title to land.
C)Because of the concept of indefeasibility, the land titles system includes a fund that will compensate people who lose their interests in land as a result of a mistake within the land title system.
D)A lawyer should be hired to help in the purchase of land, partly because the lawyer will have insurance and therefore can be successfully sued if something goes wrong.
E)A purchaser of land should purchase property insurance that takes effect as soon as title is transferred from the vendor.

Question 35

A court has said that Pedrag holds the equity of redemption in a piece of land called Blackacre.The other party involved in the mortgage is Clarissa.Which of the following statements is most likely TRUE?

A)If the equity of redemption is the only interest that Pedrag holds in Blackacre, that piece of property is located in a land titles system jurisdiction.
B)The equity of redemption is relevant only if Clarissa has obtained a final order for foreclosure.
C)The concept of equity of redemption is crucial to the creation of subsequent mortgages.
D)Pedrag is the mortgagee.
E)The "equity" involved in the equity of redemption has the same value as the debt that has yet to repaid between Pedrag and Clarissa.

Question 36

Alisa successfully used the remedy of foreclosure against Ivan.Which of the following statements is TRUE?

A)Alisa was the mortgagor.
B)Ivan was the mortgagor.
C)Alisa was the borrower.
D)Ivan was the lender.
E)Ivan was guilty of fraud.

Question 37

A registry system and a land titles system are different because
A.a mortgage creates a charge under a registry system, but a conveyance of title under a land titles system.
B.after the terms of a mortgage have been fulfilled, the mortgagee enjoys the benefit of a re-conveyance of title under a registry system, but a cessation of charge under a land titles system.
C.the remedy of judicial sale is available under a registry system but not under a land titles system.
D.the mirror principle applies under a land titles system but not under a registry system.
E.unregistered interests may exist in a land titles system but not a registry system.

Question 38

Which of the following statements provides the best definition for "the mirror principle"?

A)The only valid interests in a piece of land are the ones that are listed in the certificate of title.
B)The terms of a subsequent mortgage must reflect the mortgagor's equity of redemption.
C)The interests listed in a certificate of title cannot be defeated.
D)All of the interests listed in a certificate of title reflect valid interests.
E)A contract for the purchase and sale of a piece of land must fully reflect the terms of the parties' agreement.

Question 39

Halle agreed to sell a piece of land called Blackacre to Justin for $200 000.The sale was scheduled to close on June 1.Under the terms of the contract, Justin paid $10 000 to Halle on May 1.On May 15, however, Halle told Justin that she had changed her mind and that she intended to keep Blackacre for herself.She did so even though the market value of Blackacre had dropped to $150 000.Which of the following statements is TRUE?

A)Specific performance is not available to Justin because the value of the property has decreased.
B)Taking into account the money that he previously paid, Justin is entitled to compensatory damages worth $140 000.
C)Taking into account the money that he previously paid, Justin is entitled to compensatory damages worth $190 000.
D)If Halle refuses to repay the $10 000, Justin can use a vendor's lien to force the sale of Blackacre and to take $10 000 from the sale proceeds.
E)If Justin wanted to buy Blackacre simply as an investment, and if he has no special interest in acquiring, he probably will not receive specific performance.

Question 40

Simeon owns a piece of land called Blackacre.He has accepted Lola's offer to buy that property.The parties have created an agreement of purchase and sale.Which of the following statements is TRUE?

A)Since the parties created an agreement of purchase and sale, Blackacre must be located in a registry system jurisdiction.
B)Since the parties created an agreement of purchase and sale, Blackacre must be located in a land titles jurisdiction.
C)As long as it includes all of the relevant terms, the agreement of purchase and sale is enforceable even if it is oral.
D)Specific performance may be awarded with respect to Simeon's obligation to transfer title but not Lola's obligation to pay the price.
E)Even if a contract for the sale of land is oral, it is effective as long as both parties are willing to perform.

Question 41

Hofflehaus Inc owns a large piece of land known as Schwarzermorgen.It wanted to use that land as security for loans totaling $6 million.When it explained the situation to Primus Bank, however, it was told that it qualified for a loan of only $4 million.The company accepted the offer of that loan and allowed Primus Bank to take a mortgage over Schwarzermorgen.Primus Bank did not, however, immediately register its mortgage.The next day, the company approached Deuce Bank, asked for a loan of $2 million, and offered security in the form of a mortgage over Schwarzermorgen.The company did not mention that it had already granted a mortgage to Primus Bank and Deuce Bank had no other way of knowing about that first mortgage.Deuce Bank then (1) checked the records at the land registration office and found that there were no interests registered against Schwarzermorgen, (2) loaned $2 million to the company, and (3) immediately filed its own mortgage.The next day, Primus Bank finally registered its mortgage.And later that same day, the company suffered a devastating financial loss.That loss wiped out virtually every asset that the company had, including the $6 million that it had borrowed from the two banks.The company's only remaining asset is Schwarzermorgen.The value of Schwarzermorgen has, however, dropped to $1.5 million.That land has now been sold and the only question before the court concerns the disposition of the $1.5 million in cash.Which of the following statements is TRUE?

A)Each bank will receive half of the value of Schwarzermorgen.
B)Primus Bank will receive $1 million and Deuce Bank will receive $500 000.
C)Deuce Bank will receive $1 million and Primus Bank will receive $500 000.
D)Primus Bank will receive $1.5 million and Deuce Bank must pay $4.5 million to Primus Bank.
E)Deuce Bank will receive $1.5 million.

Question 42

Jessica wants to buy Zach's house and then turn it into a hair salon.Before the agreement of purchase and sale is signed

A)Jessica should demand a deposit from Zach.
B)Zach should file a vendor's lien against title.
C)Jessica should ensure that the property is approved for commercial zoning.
D)Zach should search to see if there are any writs of execution filed against Jessica.
E)the parties should share the cost of hiring a surveyor to determine whether the property contains toxic waste.

Question 43

Alpha Inc is interested in purchasing a particular piece of land.The company's president is, however, worried that the land may be worth less than the current owner claims.The company should therefore retain the services of

A)a surveyor.
B)a medical doctor
C)an appraiser.
D)an inspector.
E)a financier.

Question 44

Ngari borrowed $250 000 from Phoebe.As security for the repayment of that loan, he created a mortgage over a piece of land called Blackacre.Ngari has repaid part of the loan to Phoebe, but he still owes $150 000.He is unable to repay the outstanding amount.Which of the following statements is TRUE?

A)Ngari has no reason to object to the remedy of foreclosure unless the current market value of Blackacre is more than $250 000.
B)The remedy of foreclosure was created by the courts of law in order to counterbalance the equity of redemption that was created by the courts of equity.
C)Depending upon where Blackacre is located in Canada, Phoebe may not be entitled to exercise the right of foreclosure until after an attempt has been made to sell the property.
D)If the market value of Blackacre is now $300 000, Phoebe is entitled to exercise the remedy of foreclosure, but only if she pays $50 000 to Ngari.
E)The remedy of foreclosure is available only if Blackacre is located in a land titles system jurisdiction.

Question 45

Yun-Fat purchased a property from Brandon.The land titles office then issued a certificate of title to Yun-Fat.Unfortunately, a month later, the land titles office realized that it had made a mistake.The land had been owned by Marilyn rather than Brandon.Which of the following statements is most likely to be TRUE?

A)Yun-Fat is liable to Marilyn if he negligently failed to inspect the land registry.
B)Marilyn has the right to recover the land, but only if she pays Yun-Fat the property's fair market value.
C)Marilyn may receive payment from the land titles system, but only if she successfully sues it for the tort of negligence.
D)If she is unable to recover the land, Marilyn may receive compensation from the assurance fund.
E)The property must be located in one of the Maritime provinces.

Question 46

A purchaser's lien

A)is available only as long as the purchaser has possession of the property.
B)is usually found within a mortgage document.
C)is a form of security.
D)allows a purchaser to occupy a piece of land before the full purchase price is paid.
E)usually results in an order for specific performance.

Question 47

Stanislav contractually agreed to sell a piece of land to Tien for $250 000.When the time came to transfer title, however, Stanislav refused to complete the transaction.Tien consequently refused to pay any part of the price and justifiably sued for specific performance.At that time, the market value of the land was $300 000.The case was not decided by a court for five years.The judge then held that Stanislav was liable for breach of contract.At that time, the land was worth $400 000.If the court awards damages, Tien is entitled to receive

A)$250 000.
B)$400 000.
C)$300 000.
D)$150 000.
E)$50 000.

Question 48

Kevin owned a farm in Alberta, but until he returned last week, he had been living in Norway for five years.In his absence, he allowed his sister, Colleen, to reside on the property.Upon his return, however, he discovered that she had forged his signature and that Reginald's name now appears on the certificate of title.Which of the following is most likely to be TRUE?

A)Reginald is the victim of mortgage fraud.
B)Because the land is held in a registry system, Kevin's property rights have not been affected.
C)Colleen will receive payment from the assurance fund.
D)Because of the curtain principle, Kevin no longer owns the farm.
E)Kevin will remain the owner of the land as long as he applies to a court within two weeks.

Question 49

As used in the context of a mortgage, the legal concept of a "charge"
A.means that the land is located in a part of the country that uses the land titles system.
B.refers to the interest that the mortgagee must pay on the loan.
C.occurs when the mortgagor demands possession of the property.
D.means that the land must be subject to some pre-existing, unregistered interest.
E.requires title to the property to be transferred at the outset.

Question 50

Ramla borrowed $100 000 from Wilhelm.As security for repayment of that loan, she created a mortgage over a piece of land called Blackacre.Which of the following statements is TRUE?

A)As long as Wilhelm has registered the mortgage, he has no reason to care if Ramla does not pay the property taxes on Blackacre.
B)If the mortgage contract contains a bonus clause, then Ramla will have to pay a financial penalty if she repays the loan quicker than agreed.
C)Because he has both personal and property rights, Wilhelm has no reason to care if Ramla does not insure Blackacre.
D)In normal circumstances, Wilhelm has the primary duty to refrain from committing an act of waste.
E)In normal circumstances, Wilhelm will take possession of Blackacre immediately in order to protect the value of the security.

Question 51

A person who occupies a piece of land without any right or permission to do so is legally known as
A.a dweller in situ.
B.a sitter.
C.a resident in transitu.
D.a squatter.
E.an indigent occupant.

Question 52

Barton owns a piece of land called Finacre.On August 24, when the property was worth $1 000 000, he borrowed $200 000 from Alpha Bank and granted a mortgage over Finacre as security for repayment.Alpha registered its interest on September 18.On September 16, Barton borrowed $800 000 from Omega Bank.He granted another mortgage over Finacre as security.Omega registered its interest on September 17.The economy then collapsed.Barton has not repaid a cent on either loan and he has defaulted on both.The value of Finacre dropped to $500 000.If Finacre is subject to sale, which of the following statements is most likely to be TRUE?

A)Regardless of which bank registered first, Alpha has priority over Omega because Alpha's mortgage was created first.
B)Alpha has priority over Omega as long as Alpha was the first bank to notify Barton that its interest was registered.
C)Neither bank will receive full repayment of its loan.
D)Barton borrowed four times as much from Omega as from Alpha.The sale proceeds will be distributed in the same proportion.Omega will receive $400 000 and Alpha will receive $100 000.
E)If either bank receives less than full repayment from the sale proceeds, it is entitled to compensation from the assurance fund.

Question 53

Suki was recently involved in a successful application of the insurance principle under the land titles system.This most likely means that

A)the system made sure that she retained title to her land.
B)she received a benefit under an insurance policy that she purchased from a private company.
C)by checking the records carefully, she satisfied herself that she was at the end of a good chain of title.
D)she acquired title to a new piece of land.
E)the doctrine of indefeasibility has deprived her of an interest in land.

Question 54

Zoe and Lucius are parties to a contract that allows Zoe to take the benefit of a "prepayment privilege" (as that term was used in the text).Which of the following statements is most likely to be TRUE?

A)The prepayment privilege indicates that Lucius borrowed money from Zoe.
B)The prepayment privilege was intended to compensate Zoe for the loss of interest on a loan.
C)The prepayment privilege was intended to allow Zoe to demand repayment of a loan earlier than expected if interest rates decrease.
D)Zoe, as a mortgagor, wanted the prepayment privilege, which is the right to repay the loan early without being liable to Lucius for a "bonus," which is a penalty that a lender imposes on a borrower who tries to reduce interest payments by repaying a loan early.
E)The prepayment privilege indicates that Zoe has agreed to sell a piece of land to Lucius and that she is entitled to receive payment even before she transfers title to him.

Question 55

Primus Inc has agreed to purchase a piece of land from Cherie.That agreement is subject to a "condition" (as that word was used in this context in Chapter 16).The condition reflects the fact that Primus must arrange financing through a bank in order to afford the purchase.Which of the following statements is most likely to be TRUE?

A)The parties will not have a contract until the condition is satisfied.
B)Neither party is required to do anything while waiting to see if the condition is satisfied.
C)The condition has the effect of suspending the need for Cherie to transfer the land to Primus.
D)The condition can also be called a condition subsequent.
E)The land must be located in a jurisdiction that uses a registry system.

Question 56

Aidan and Nadia are parties to a contract that allows Nadia to enforce an "acceleration clause" (as that term was used in the text).Which of the following statements is most likely to be TRUE?

A)Nadia borrowed money from Aidan.
B)The parties' contract is subject to a condition precedent that requires Aidan to do something (such as arrange financing for the purchase) within a certain period of time.
C)Nadia is concerned that Aidan may fall into a habit of failing to make loan payments on schedule, so she wanted the right to demand immediate repayment of the outstanding balance if he pays late.
D)Aidan is indebted to Nadia, but he cannot possibly be a mortgagor.
E)Nadia is entitled to repay a debt to Aidan more quickly than their contract contemplates.

Question 57

Solomon recently purchased a piece of land for $200 000.A short time later, however, the land was seized by the government and sold.That is true even though Solomon never breached any obligation and always paid his debts on time.Which of the following statements may best explain this set of events?

A)Solomon purchased a piece of land that contained squatters.
B)The land is subject to a public easement.
C)Solomon's vendor was subject to a writ of execution before Solomon acquired the land.
D)Solomon exercised a purchaser's lien.
E)An official at the registry office wrote Solomon's name on the wrong certificate of title.

Question 58

Vigo has agreed to buy a house and he is about to sign a mortgage contract with the Bank of Sanguis.Which of the following should Vigo not expect to see?
A.A term stating that if Vigo misses a single payment, he must immediately repay the full amount of the loan.
B.A term, called a bonus, that entitles to Vigo skip the final instalment on the loan if he repays the other instalments early.
C.A term indicating that the bank is entitled to receive money to pay taxes.
D.A term requiring fire insurance on the property.
E.A term prohibiting Vigo from cutting down the trees on the property.

Question 59

Horace borrowed $100 000 from Blossom.As security for repayment of that loan, he created a mortgage over a piece of land called Blackacre.Horace has repaid part of the loan, but still owes $40 000 to Blossom.He is unable to repay the outstanding amount or make the next mortgage payment.Which of the following statements is TRUE?

A)Under normal circumstances, Blossom has the right to take possession of Blackacre, but only if the land is located in a land titles system jurisdiction.
B)Because the parties have both a loan contract and a mortgage, Blossom has an absolute right to sue Horace personally for $40 000, regardless of the province or territory in which Blackacre is located.
C)If Blossom exercises a right to take possession of Blackacre, she cannot later use the remedy of foreclosure.
D)If Blossom exercises a right to take possession of Blackacre, Horace's equity of redemption will necessarily be terminated.
E)If the mortgage contract contains an acceleration clause, then Horace may be liable to immediately pay $40 000, even if the parties originally expected that he would pay half of that amount next year.

Question 60

As used in the context of a mortgage, a "prepayment privilege"

A)means that the lender can demand repayment of the loan sooner than expected.
B)means that if the borrower misses a payment on the loan, the entire amount becomes due immediately.
C)is used to allow certain payments to be made without penalty.
D)arises in connection with an insurance contract.
E)is prohibited in many Canadian provinces.

Question 61

Identify and briefly explain why the remedy of possession often is not particularly attractive to a bank that is a mortgagee.

Question 62

Salvatore is considering buying a piece of land called Blackacre that previously contained a chemical factory.He has hired an environmental auditor.As Salvatore explained, "It's a good move from a risk management perspective.By hiring that person, I may avoid liability in the first place and I may have access to a source of compensation if something goes wrong later on." Explain the meaning of Salvatore's statement.

Question 63

Pascale bought a piece of land called Blackacre from Jeff.The purchase price was $500 000.The purchase was made entirely on credit.Although Pascale has taken possession of Blackacre, she has not paid any part of the purchase price, despite being required to do so by the sales agreement.Jeff wants to have Blackacre seized and sold in order to provide a fund with which the purchase price can be paid.Unfortunately for him, he did not receive a mortgage over Blackacre.Is there any other basis upon which he can take action against Blackacre in order to receive payment? Explain your answer.

Question 64

Syd borrowed $100 000 from Marnie.To secure repayment of that loan, he created a mortgage over a piece of land called Blackacre.Syd has now repaid the loan and complied with all of the terms of the mortgage.Under what circumstances will Marnie be required to complete a re-conveyance of title? Under what circumstance will she be required to complete a cessation of charge?

Question 65

Briefly explain the relationship between the mirror principle and the curtain principle in the context of a land titles system.

Question 66

In the context of land registration systems, what is the insurance principle? Is this principle applicable under a registry system or under a land titles system?

Question 67

Briefly explain the need for some form of land registration system.

Question 68

Identify and briefly explain four types of remedies that may be available if the mortgagor defaults on a mortgage.

Question 69

On January 1, Ichiro contractually agreed to sell a piece of land called Blackacre to Mandy for $250 000.The sale was scheduled to close, and the price was expected to be paid in full on December 1.Before that date, however, the value of Blackacre increased to $350 000 because of a general increase in the real property market.Ichiro now refuses to complete the transaction by transferring Blackacre to Mandy.She admits that she wanted to purchase the property for investment purposes only.Nevertheless, she claims that if she does not receive specific performance, she will not enjoy the benefit of the contract.Will a court award specific performance? If not, is there any other way for Mandy to enjoy the benefit of the contract? Explain your answers.

Question 70

Belinda owned a piece of land called Blackacre.On Monday, she used it to create a mortgage in favour of Johnny.On Tuesday, she used it to create a subsequent mortgage in favour of Humphrey.Humphrey registered his mortgage on Thursday.Johnny registered his mortgage on Friday.Explain a situation in which Johnny's mortgage has priority over Humphrey's.Explain a situation in which Humphrey's mortgage has priority over Johnny's.

Question 71

Raj bought a piece of land called Blackacre from Erin for $200 000.In making that purchase, he created a mortgage over Blackacre.Explain a situation in which the sale and the mortgage involved only Raj and Erin.Explain a situation in which the sale and the mortgage involved Raj, Erin, plus another person.

Question 72

Evan borrowed $100 000 from Joanna.As security for the repayment of that debt, he created a mortgage over Blackacre.Blackacre consists of a piece of land and a house.Explain why is it important to both parties that Blackacre is protected by insurance.

Question 73

Irene agreed to sell a piece of land called Blackacre to Noriel.That contract was subject to a condition precedent.The condition precedent was concerned with Noriel's ability to arrange suitable financing.Does a contract already exist? Is either party required to do anything immediately? If the condition is not met, can either party be held liable? Explain your answers.

Question 74

Monique owns a piece of land called Blackacre.Blackacre is worth $500 000.Monique created a mortgage in Bjorn's favour to secure repayment of a $200 000 loan that she received from him.A short time later, she created a subsequent mortgage in Mike's favour to secure repayment of a $250 000 loan that she received from him.Does the existence of two mortgages expose Monique, Bjorn, or Mike to a substantial risk of financial loss? Explain your answer.

Question 75

On March 1, Eleanor entered into a contract to buy a piece of land called Blackacre from Hershey.The purchase price was $200 000.Eleanor paid $20 000 immediately and promised to pay the remainder when the sale closed on June 1.On June 1, however, Hershey refused to complete the sale.He also refused to refund Eleanor's $20 000.He honestly explained that while he has Blackacre, he simply does not have any money so he needs the deposit money to live on.What remedy should Eleanor use? Explain your answer.